However, the state Excise and Taxation Department ruled out any loss to the tax revenue, saying that adequate steps would be taken to prevent revenue leakage. "There is definitely going to be about 10-15% revenue loss to the excise and taxation department by switching over to single stage tax structure on certain items as thousands of dealers or traders (of particular trade) will be out of the tax net," noted tax expert P C Garg said on Friday.
Citing an example of white goods, at present the Department is collecting tax at several stages from distributors, dealers and retailers for a particular commodity under the Value Added Tax (VAT) model.
"But now under the single stage tax structure, the Department will collect tax at first stage which means from distributor or manufacturer only. There is not going to be tax collection from subsequent stages like dealers and retailers as they will be out of tax chain," Garg pointed out.
"Dealers and retailers presently pay tax by adding their profit margin and other expenses in the price of the product before selling it to customers ," he added. Tax experts further said single stage tax structure, which was prevalent before the introduction of VAT, could also encourage unscrupulous dealers to hoodwink the department by not paying tax on items brought from other states in connivance with department officials.
"Single stage tax structure will encourage proliferation of illegal trading activities which will be difficult for the tax seluths to keep a check," another tax expert from Amritsar said.
"VAT Act was brought with this purpose to eliminate tax evasion at any stage of the items," he asserted.
In an unprecedented move, Punjab government on Thursday introduced single stage taxation structure for white goods, aerated drinks and Fast-moving consumer goods (FMCG) sectors whereby entire tax will be collected at the first stage of transaction, making subsequent stages tax free.
This move was aimed to bring out dealers and small retailers from tax net as they would no longer be required to maintain books of accounts or bills. Though dealers and small retailers welcomed the move of the state government, they sought more clarification on implementing this system.
"There is a need to give more clarification about this system as whether the department will consider turnover of any dealers while keeping them out of tax net," a Ludhiana-based consumer durable items dealer R K Gupta said.
When contacted Punjab Excise and Taxation Commissioner Anurag Verma told PTI that there would not be any revenue loss to the state with the implementation of single stage taxation system on white goods, aerated drinks and FMCG items.
"We will have to bring in adjustment in tax rates. We will adjust it in such a way that the state revenue from these sectors are not affected even after excluding subsequent stages (dealers and retailers)," he said.He further said once the tax is collected at the first stage, subsequent stages would be tax free.
Verma also said that the strict vigil at the borders by the tax seluths would not allow any illegal trading activity to happen.
As per estimates of Punjab Excise and Taxation Department, about 40% of registered dealers in Punjab do not pay tax at all while only 10 companies contribute 28% of state's total VAT revenue.